Having money in a rapidly rising market, especially if it's lots of money, can make you feel rich. On the other side of that sword, however, is the panic you feel when things start coming apart.
I've been investing in stocks for 40 years, and I don't recall a time more volatile than what we've endured in the last year, and especially over the last couple of weeks.
Last February, the Dow Jones Industrial Average was at about 30,000. A few weeks later in mid-March, it dipped below 19,000, a head-spinning decline of 37%. And since that time, it's been on a tear. We regained, then exceeded, Dow 30,000, and it's been mostly in a straight line, except for a few quick, minor dips.
Until recently, that is. One day the market is up 500, the next down 700. It's been a roller coaster, with some of the biggest bubble stocks (e.g. Tesla) down 20% or more from their highs.
What's going on? Well, if you listened to the podcast we recorded January 28 of this year, Is the Stock Market in a Dangerous Bubble?, you'd know exactly what's happening. In that episode, I told you to watch for rising interest rates, because rising rates are often the pin that pops a stock bubble. And rising rates are what's behind the recent market mayhem.
At the end of January, the rate on the 10-year Treasury bond was barely above 1%. Now it's above 1.5%. Still low, but that's a 50% move in a little more than a month.
I also told you in the same podcast that the stocks most vulnerable to market corrections would be the highest flyers, like Tesla and big tech stocks. That too was sound advice. As rates have recently risen, these are the stocks that have been hammered the most.
So that's where we are and where we've been. The question now is, where are we going? That's what we're going to attempt to determine in this week's "Money!" podcast.
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